China plans to expand electric vehicles and battery production

Chinese companies are on a massive plan to build a series of Electric Vehicle battery factories that would produce nearly 160 gigawatt-hours annually by 2021, says a report by Bloomberg Intelligence.  The amount of batteries is anticipated to equip 2 million Tesla Model S vehicles or 18 million Toyota Prius plug-in hybrids every year. Demand for Lithium ion batteries is forecast to explode in the next five years due to increase in the number of electric vehicles.

China currently produces about 55% of global lithium ion battery, compared with 10% in the United States and by 2021; China’s share is forecast to grow to 65% according to Bloomberg New Energy Finance.  Chinese government announced plans to consolidate battery manufacturers to help the industry mature. The initiative is an extension of China’s plans to equip the country’s highways with 5 million electric vehicles by 2020.

China is under pressure to save the smog-choked streets in Baoding, Xingtai, Shijiazhuang and other cities from pollution and electric car project is a part of that. At the same time they want to grow the electric vehicle market in the country so that there is enough end user demand for the domestically produced aluminium semis and the this will also create a domestic market for Chinese battery manufacturers.

“The Chinese government wants to encourage the creation of a domestic market to create a large enough base and gain a foothold,” said Goldie-Scot, a Bloomberg New Energy Finance analyst. “From there, they can expand and sell globally.”

According to Bloomberg report, global battery-making capacity would grow twofold by 2021 to 273 gigawatt-hours, up from 103 gigawatt-hours today. That’s a huge opportunity, and China wants to leverage upon it.

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Individual Chinese battery companies can match the scale of Tesla’s plan for electric vehicle battery production. But, China can give competition by consolidating smaller domestic players like Amperex Technology, Tianjin Lishen Battery Joint-Stock Co. and dozens of others.

Over the next 20 years, electric vehicles (EVs) may have a much greater influence on the London Metal Exchange metal prices than the oil market. Aluminium will also continue to benefit from the push to make cars lighter and fuel efficient at the same time as a component in battery production.  In both the cases, aluminium remains a winner.